NAIFA survey: MLR provision harms consumers, agents

In a presidential election cycle where job creation is a key issue, 15% of National Association of Insurance and Financial Advisors members surveyed recently say President Barack Obama’s health care reform law’s medical loss ratio provision has decreased their commissions enough to cause them to need to lay-off or reduce the hours of support staff in their offices — affecting an average of two employees per agency.

The NAIFA survey reveals the devastating effect on agents’ ability to maintain a high level of customer service to their clients.

Of the more than 860 organization members who sell health insurance, 14% say they have considered reducing staff and 21% say they will do so if commissions remain depressed.

“When health insurance agents and brokers are forced to cut their staff, then there are fewer people available to solve clients’ problems and answer complex questions that arise every day in a health care system that grows ever more complicated,” says NAIFA President Robert Miller. “Consumers are the ones who are hurt by the MLR when agents have to reduce service. Insurance agents do more than sell insurance; they help companies and their clients select the right plan, understand a plan’s coverage and assist with claims. All of this requires a level of expertise that is only gained with experience in the world of health care.”

The MLR provision in the Patient Protection and Affordable Care Act requires insurers to spend at least 80% of individual and small group health insurance premiums and 85% of large group premiums on medical or quality improvement expenses. The MLR has prompted most insurers to slash the commissions of brokers since it went into effect in January 2011.

According to the survey, 70% of members who sell health insurance have seen a decrease in commissions. Of that 70%, 53% say their commissions decreased by a quarter or more, while 18% say their commissions decreased by half or more. Of those who have not experienced a decrease yet, at least 12% have been informed by carriers that their commissions will be reduced in the near future.

In addition, since the MLR provision went into effect:

• 11% of respondents say they have gotten out of the market for individual health policies.

• 5% have stopped selling and servicing health coverage.

• 30% say that if commissions remain depressed they will stop selling and servicing individual health policies, while 22% say they will stop selling all health insurance.

Ninety percent say their clients’ premiums have increased or will increase in 2012, in spite of the MLR.

“Removing agent commissions from the MLR won’t have any impact on premiums, but leaving them in seriously dilutes customer service,” says Miller.

The Senate bill S.2288, Access to Independent Health Insurance Advisors Act of 2012, would change the way agent compensation is considered in the MLR. A similar bill in the House of Representatives, H.R. 1206, has more than 200 bipartisan cosponsors.